Fresh troubles worsen Horizon's US$33 million first quarter loss

STILL troubled Horizon Lines has posted a quarterly US$33.3 million loss compounding last year's first quarter $11.7 million loss, further aggravated by the termination Maersk agreements, a slack season contribution from its new China service and a general rate slump.


"The historically soft quarter was impacted by the termination of Maersk agreements, and the seasonal slowness associated with the start-up of our new China service in the post Chinese New Year period," said Horizon president and CEO Stephen Fraser.


"These factors were further exacerbated by a steep decline in international rates, a sharp rise in fuel prices, and the ongoing slow business conditions in Puerto Rico and Hawaii," he said.


Yet quarterly revenue increased four per cent to $285 million while operating profit still fell into a $7.4 million loss against last year's $12 million first quarter gain.


The Charlotte, North Carolina, Jones Act carrier also divulged that it "anticipates a covenant default under the senior credit facility in connection with the amended financial covenants' at the end of Q2", reported London's Containerisation International.


"Noncompliance with the financial covenants constitutes an event of default, which, if not waived, could prevent the company from borrowing under the senior credit facility and could also result in acceleration of the maturity of the facility. The company anticipates working with its lenders to obtain waivers and amendments or to refinance prior to any possible covenant noncompliance."


Only last week news came that Horizon had escaped a default after a federal court approved prosecution proposals to reduce it price fixing fine from $45 million to $15 million.


"As a result of the reduced fine, the company expects in the second quarter to reverse $19.2 million of the $30 million charge recorded on a present-value basis during the fourth quarter of 2010 related to the legal settlement, Mr Fraser said.


"Regarding our refinancing efforts, the company and its representatives have been engaged in constructive discussions with our banks, bondholders and their advisors, as well as with other potential lenders. The fine reduction should give our business partners renewed confidence in our company's ability to continue supporting our customers," Mr Fraser said.
(Source:http://www.schednet.com)